REGIONAL FOCUS COLORADO: Rocky Mountain highs and lows - Localfirms weather the storm, but the big boys can't get a foothold

They appreciate the access and the honesty.

They appreciate the access and the honesty.

And not all crises are bad crises, according to Gronbach. "In the same day we'll have a negative local issue with a state utility agency moving on action against the company, and we'll also handle positive national news about refinancing,

he says. "In the meantime, we're constantly fighting the rumor mill."

Since both Tarpey and Gronbach arrived in late 1998, the PR practice has increased from a staff of three, to 16. "PR plays an important role in this kind of marketplace,

says Gronbach. "Agencies help us in a very broad sense. Internally, we focus on the day-to-day issues that crop up.

It takes individuals with strong judgement, motivation and drive to work in this type of environment. Some people do very well in agency environments. Some do well in corporate environments.

Here you need a blend of those skill sets."

Both Tarpey and Gronbach are optimistic that the industry and the company will recover and that the PR practice will shift again.

"We grew and we matured very fast,

says Tarpey. "It's great experience to be able to do this. You can't buy it in a classroom.

"Qwest is supporting us very well,

he continues. "PR people are always included in the room when important issues are discussed. That's a benefit that is earned, not just awarded to our PR team. We have very solid, professional and friendly business relationships, from the CEO, to counsel, through all the corporate heads."

Economic highs and lows have been as much a part of Colorado's landscape as the mountainous peaks and valleys that dominate its geography.

"Boom and bust is a constant cycle here,

says Edie Sonn, principal of JohnstonWells, a generalist PR firm with expertise in healthcare, real estate, financial services, and food. "We made a strong effort to diversify the economy, particularly after the severe downturn in the oil and gas industry in the 1980s. This is not the first recession we've seen, and it won't be the last."

The Denver Chamber of Commerce formed the Denver Metro Network (DMN) to create jobs after the oil and gas bust. The network launched a "Convergence Corridor

branding campaign to tout Colorado as a hotbed for hi-tech service convergence, and ultimately attract companies.

"We've had so much change in our economy,

explains Chris Power Bain, the Chamber's director of communications. "As we came into the prosperity of the 1990s, we needed workers, and the task of DMN shifted. But now we're back to creating jobs, which are increasingly technical."

Tech hotbed cools off

There is no doubt tech has taken root in Colorado. The Office of Economic Development and International Trade reports that Colorado has 5,500 hi-tech businesses and the fourth highest concentration of hi-tech exports nationally. In 2001, Liberty Media (a cable company spun off of AT&T), Qwest, and Echostar were ranked one, two and three in the state by market capitalization, according to The Denver Business Journal. Time Warner Telecom, Ball Corporation, Storage Tech, Level 3 Communications, and McData Corporation all occupy the top 20.

"Tech companies spin off each other, and then everything builds - infrastructure, the workforce, partners, and investors who understand the business,

says John Metzger, CEO of Metzger Associates. Metzger has practiced tech PR since the early 1990s and currently employs about 25 people (15 were laid off in 2001). "We were down about 25%, but we'll be back up around $4 million this year. Tech has been hammered, but it's not going away."

Many businesses were pruned in the harsh, economic climate. "Clients who stiffed us affected us the most last year,

says Sonn. "There were four or five big ones, tech-related for the most part.

JohnstonWells currently employees 20 people, down from 36 at the start of 2001. Sonn says most of the losses were through attrition, but "we did have to ask everybody - management first - to take pay cuts during 2001. We laid off two or three, but by the end of last year we were able to take most of the remaining staff back up to full salary."

Not every industry got whacked, though. Natural resources, banking, real estate, tourism and education have helped pad the economy, with companies like Newmont Mining, Forest Oil Corporation, and First Data Corporation prominent.

"While there's been a downturn in telecoms and tech, precious metal stocks have done comparatively very well,

says Doug Hock, director of public affairs and communications at Newmont Mining. Last November the company acquired Canadian and Australian mining operations, making it one of the largest mining companies in the world.

"There's been a lot of interest in our stock, and we had a rival South African bidder (in the acquisition deal), so there was a lot of interest from the financial press,

Hock says. "Denver had lost several headquartered companies, so the local press was interested in us because a Denver-based company was becoming the largest in its industry."

Newmont currently works with Ketchum on issues management, but also uses local firms for other projects. "From a flexibility standpoint, we don't want an agency of record,

says Hock. "We would like to use different agencies and individuals with various expertise as situations arise."

While tourism is a major part of Colorado's economy, the downturn seems to have kept most of that PR business in-house. Christopherson & Co., a small, integrated marketing and PR firm, handled a lot of tourism accounts in the past, but is currently down to only two, Sheraton Suites and Ski Train. The company says it hopes to regain more when the economy loosens.

PRACO, another integrated marketing and PR firm, has for the last three years held the Colorado Tourism Office account.

Home team advantage

Overall, Colorado's small homegrown PR agencies have survived better than big-name out-of-towners that have tried to get a foothold in the state. With the exception of Ogilvy, which entered Colorado via its purchase of techcentric Alexander, large firms have not fared well. Hill & Knowlton and Incepta both pulled out, while Weber Shandwick Worldwide and Carmi-chael Lynch Spong hold on with short client lists and one and two staffers respectively.

"Independent firms have roots planted here and they extend out into the community,

says MGA Communications president Jeff Julin. "Multi-nationals don't have that so much, and it would be harder for them to survive a bust. I think we do have a better understanding of it."

Bob Schenkein, president and CEO of Schenkein echoes that sentiment.

"Not one multinational has come here and done well,

he says. "There was a certain amount of greed in the PR business, and multinationals are under tremendous pressure to meet bottom lines."

Metzger points to the billing flexibility of the smaller firms. "Agencies like Alexander and Cunningham scaled up to the point that they didn't have anything but $45K minimum monthly clients,

he says. "So when clients began saying they wanted the same thing for $10K, we found ourselves in a big price war. Other firms had too much infrastructure to scale back, but we were able to scale up and down a little easier."

In fact, Colorado's independents own some of the biggest corporate accounts in the state. Schenkein handles First Data, and represents Qwest nationally in product support, wireless, and yellow pages. Around 80% of the agency's work is national, and 90% of clients are Colorado based. Schenkein employs 30 people, three of whom were hired this year, and it hasn't laid off anyone in 29 years.

"Our revenue last year was the best in our history,

says Schenkein.

"We're very disciplined; we only have 17 clients. We had absolutely no receivable problems last year."

While Metzger lost some money last year, big clients such as Sprint PCS, Digital Globe, and SclumbergerSema helped insulate the agency. MGA also saw a loss in total billings, and its employee base is down to 28 from a high of 45. But big clients, such as Shell Oil, a DC-based coalition called Americans for Balanced Energy Choices, Broadband Services, and the Colorado Education Association, helped MGA weather the downturn.

"We all took our technology hits,

Julin says. "Our broad base, particularly in the stakeholder area, has given us stability. We're hoping to do about the same in 2002 that we did in 2001. If we could bill $3.2 million to $3.3 million, I'd be happy."

Other small agencies boast some big regional accounts. JohnstonWells handles Wells Fargo. Barnhart/CMI pulled in Burger King earlier this month, and also handles Krispy Kreme and Starbucks. Ayers/BSM&R Strategic Public Relations' biggest account is Johns Mandille (a Denver-based insulation company), and in January it also won Krone, a German telecom company with American operations in Colorado.

How the big agencies are faring

Ogilvy is by far the strongest multinational, being agency of record for Qwest, Sun Microsystems, Evolving Systems, and Xerox office printing.

While it inherited a tech-heavy client base from Alexander, it will look to broaden this year. "Last year we expanded into marketing, and we're building our marketing, health and medical practices,

says Cherie Quaintance, co-managing director.

Carmichael Lynch Spong opened shop in late 2000 primarily because account leader Elizabeth Neid's husband needed to relocate to the state. Since then the company added one employee and plans to stay in the market. Its cornerstone Colorado client is White Wave, a Boulder-based natural foods company

"We're looking to grow the office with local talent,

says Neid. "We look at Denver as a good market - there's a nice diversity of business and industry. Our goal isn't to be the fastest-growing firm in the city, but we're committed to being in Denver. We're looking for a short list of long-term clients."

WSW came into Colorado based on tech account JD Edwards, but last year, the client "moved on,

leaving the agency with just one anchor account.

SVP David Beigie had been hired away from Qwest (he served as USWest's chief spokesperson for several years) to help identify new clients. Beigie brought in Cigna last year, which he says was the single biggest new business win for WSW in 2001. He insists the agency is committed to rebuilding.

"We're in the final rounds on a number of pitches,

says Beigie, "and frankly my next assignment will be to bring on additional people. Right now, Denver is served by local boutique firms. My vision is to change the rules of the game and to offer companies here global resources within a single phone call or e-mail.

"Newmont Mining has just become the biggest company in its field," Beigie continues. "One of my goals is to stay in front of that company. They're going to need a company like WSW. You don't have to fake being international when it's in your DNA."

The PR challenge facing Colorado's biggest corporation

The in-house PR team at Denver-based Qwest is fighting to control a lot of bad news right now - SEC investigations, spiralling stocks, class action lawsuits, redundancies, debt, job losses, and the woes of the telecoms sector - but it believes it has the resources to pull through.

"The Wall Street Journal reported that there are 49 different (SEC) investigations underway since the first of the year,

says Michael Tarpey, SVP corporate communications. "This issue has an overhang, an effect of being a negative until something is resolved.

And what will be resolved is a matter of speculation.

"I worked at AT&T,

continues Tarpey, "and it seems, looking back, that we had a crisis once or twice a month. Now we have one every day because the business world has gotten more complicated."

Tyler Gronbach, SVP media relations, has to handle most of these crises.

"There is a right way to communicate negative news,

he says. "We've learned to be proactive in media outreach; to make our language clear and concise, and not use too much jargon; and to try and give access to PR spokes-people and executives that are helping set strategy. We get information to the press so they understand the story.

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